starbucks

Howard Schultz: Starbucks is a Technology Company

August 7, 2024         By: Steven Anderson

It would be easy to be taken aback by that headline. After all, I think most of us figured that Starbucks was a coffee shop, not a technology firm. However, Starbucks CEO Howard Schultz sees things just a little differently, and while they won’t be throwing over chocolate chips for silicon chips any time soon, it’s clear that Starbucks’ future is a lot more digital than ever before.

The third-quarter earnings call made it clear, as Schultz launched into a description of the company’s digital projects, including the plan to bring digital order-ahead options to every Starbucks location by the end of 2015.

Indeed, the company has already seen quite a bit of success with these new options; its Mobile Order & Pay system has been driving traffic sufficient to generate four percent growth in the third quarter. Moreover, the company was also looking into several new digital partnerships that would help drive further growth, and also bring down costs in customer acquisition. Costs weren’t exactly a problem, Schmidt noted, but savings are savings.

One of the biggest problems that Starbucks faces is that its drinks take time to make. That in turn can lead to lines at the cash register, a lesser-quality customer experience, and people walking away from Starbucks outright with cash unspent.

Now with Mobile Order and Pay, users can pay for a drink from the app and simply pick it up, which drops the line at the cash register. It doesn’t eliminate it, of course, but it does cut it back. Line savings mean time savings, and that means added value for all concerned.

Starbucks is also boosting its reward capability, offering up Gold memberships for customers to earn free stuff with the company, including food and drink. Loyalty programs, done right, have been around for a long time and have routinely provided benefit to both users and companies alike, and this is no exception.

Gold membership requires its members to make 30 purchases in a year, and the rewards program members make up just shy of a third—30 percent—of the total spending in North America.

Basically, not only are Starbucks stores seeing plenty of traffic, they’re also seeing plenty of return traffic and users interested in making the necessary purchases to take advantage of the rewards program. This is all great news for the company, but it’s also a great showing for mobile payments. A lot of Starbucks’ success comes down to its use of the mobile payment, and the mobile app, and when one platform is driving this kind of success, that’s great news for not only the company that uses it, but also for the platform.

It’s still fairly early days for mobile payments, but the sheer success that Starbucks has had thanks—at least in part—to putting them to work means that plenty more places are likely to get in on the action, and thus help drive mobile payments to a new prominence.